Kalpesh Classes

Questions 3-6 mark types

Question (ID 01) (DTAA)

A is a musician deriving income from concerts performed outside India of Rs. 50,000. Tax of Rs. 10,000 was deducted​​ at source in the country where the concerts were given. India does not have any agreement with that country for avoidance of double taxation. Assuming that the Indian income of A is Rs . 290,000 what is the relief due to him u/s 91 and explain the provisions of law.

Question (ID 04) (Revision ​​ / Home work) (DTAA)

Nandita, an individual resident retired employee of the Prasar Bharati aged 60 years, is a well-known dramatist deriving income of Rs. 1,10,000 from theatrical works played abroad. Tax of Rs.​​ 11,000 was deducted in the county where the plays were performed. India does not have any Double Tax Avoidance Agreement under section 90 of the Income-tax Act, 1961, with that country. Her income in India amounted to Rs.5,10,000. In view of tax planning,​​ she has deposited Rs. 70,000 in Public Provident Fund and paid contribution to approved Pension Fund of LIC Rs.32,000. She also contributed Rs. 18,000 to Central Government Health Scheme during the previous year and gave payment of medical insurance premium of Rs. 21,000 to insure the health of her father, a non resident aged 76 years, who is not dependent on her. Compute the tax liability of Nandita.​​ 

Question (ID 05) (DTAA)

X (28 years) is resident and ordinarily resident in India. His income is Rs.8,96,000 from a business in India and Rs. 1,92,000 from a business in a foreign country with whom India has an ADT agreement. According to the ADT agreement, income is taxable in the country in which it is earned and not in the other country. However, in the other country such income can be included for computation of tax rate. According to the tax laws of the foreign country, business income of Rs. 1,92,000 is taxable @ 23 per cent. During the previous year, X has deposited Rs. 42,000 in his public provident fund account (out of which Rs. 10,000 is deposited out of foreign income). He has also received an interest of Rs. 32,000 on Government securities.

Question (ID 06) (DTAA)

X Ltd. is an Indian company. For the previous year, the following incomes are noted​​ from the books of account of the taxpayer –  ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 

Income from a business in India  ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 3,80,000

Income from a business in a foreign country with whom India has ADT agreement  ​​ ​​ ​​​​ 2,16,000

According to the ADT agreement, Rs. 2,16,000 is taxable in India. However, it can also be taxed in the foreign country @ 17.5 per cent which can be set off against Indian tax liability.

Question (ID 03) (DTAA)

A foreign company, ST, has entered into an agreement with an Indian Company KN for supply of know – how and the agreement is within the industrial policy conditions laid down by the Central Government. In the year, Rs. 50​​ lakh is paid, under the agreement, to ST by KN. ST claims to have spent Rs. 14 lakh as expenses in India to be recognized as a deduction.

In the following situations, what will be your decision on the tax liability of the parties:

• The agreement having been​​ entered into before June 1, 2008 and approved by the Government, KN pays to the Indian Income-tax Authorities the tax payable by ST;

• There is no agreement as to KN bearing the tax liability. The royalty payable is decided to be Rs. 59 lakh net of taxes.

Question (ID 07) (DTAA)

Y (24 years) and Z (26 years) are resident in India. The following points are noted for the previous year from the books of account -

Question (ID 08) (DTAA)

X (61​​ years) is a musician deriving income from concerts performed outside India of Rs. 7,50,000. Tax of Rs. 1,50,000 was deducted at source in the country where the concerts were given and remaining Rs. 6,00,000 is remitted to India. India does not have any agreement with that country for avoidance of double taxation. Assuming that the Indian income of X is Rs. 4,00,000, what is the relief due to him under section 91 for year, assuming that X has deposited Rs. 22,000 in the public provident fund account during the previous year.

“Key​​ to​​ success​​ is​​ only​​ writing​​ practice.”

CA Kalpesh Sanghavi

Interpretation of Tax Treaties​​ 

Question (ID 02) (DTAA)

Arif, a resident both in India and Malaysia in previous year, owns immovable properties (including residential​​ house) at Malaysia and India. He has earned income of Rs. 50 lakhs from rubber estates in Malaysia during the financial year. He also sold some property in Malaysia resulting in short-term capital gain of Rs. 10 lakhs during the year. Arif has no permanent establishment of business in India. However, he has derived rental income of Rs. 6 lakhs from property let out in India and he has a house in Lucknow where he stays during his visit to India. The Article 4 of the double taxation avoidance agreement between India and Malaysia provides that where an individual is a resident of both the Contracting States, then he shall be deemed to be resident of the Contracting State in which he has permanent home available to him. If he has permanent home in both the Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests).

You are required to state with reasons whether the business income of Arif arising in Malaysia and the capital gains in respect of sale of the property situated in Malaysia can be taxed in India. Also explain the relevant provisions of law. ​​​​  

List of Important Question to be glanced for Revision before exam.

Wishing You all the best for exams.​​